TaxTMI 
TaxTMI 
2019 (6) TMI 1147
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.... party no.3, pursuant to such notification. 2. The facts, in a nutshell, necessary for adjudication of this case are that petitioner no.1 is a Company incorporated under the Companies Act and carries on its business in producing cement. With effect from February 1994, the Service Tax was brought into the statute book for the first time through Finance Bill, 1994-95. Subsequently, vide notification dated 02.7.1997 of the Central Government (Annexure-1) 'Consulting Engineering' services was brought under the purview of service tax. Again by virtue of Section 68 of the Finance Act 1994, confers power on the Central Government to notify the taxable services. Accordingly, the Central Government in exercise of the power under sub-sections (1) and (2) of Section 94 of the Finance Act, 1994 made the Rules by amending the Service Tax Rules 1994. By virtue of impugned notification dated 01.08.2002, sub-Clause (iv) to Rule 2 (1)(d) of Service Tax Rules, 1994 brought into the statute book. For ready reference, the same is reproduced hereunder: GOVERNMENT OF INDIA MINISTRY OF FINANCE DEPARTMENT OF REVENUE ... New Delhi, dated the 1st August, 2002 10 Sravana 1924 (Saka....
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....g due formalities. Accordingly, four invoices were raised on 22.10.2003 by the overseas supplier namely, M/s. Loesche GmbH of Germany on the petitioner-Company. On 28.8.2004 audit objection was raised by the audit party of the Commissioner, Central Excise & Customs, Bhubaneswar-opposite party no.2, alleging that the petitioner-Company is liable for service tax in respect of the value of the said engineering plans, drawings and designs imported by it from M/s. Loesche GmbH of Germany for rendering services under the heading of 'Consulting engineering Service'. As such, the petitioner-Company is liable to pay the service tax under the impugned notification dated 01.08.2002. Accordingly, show-cause notice under Annexure-3 was issued. 4. Assailing the same, this writ application has been filed. 5. In course of the argument, learned counsel for the petitioner-Company verily relied upon the judgment of the Hon'ble Supreme Court in the case of Laghu Udyog Bharati and another v. Union of India and others, (1999) 6 Supreme Court Cases 418. The relevant paragraphs of the said judgment which are placed reliance by learned counsel for the petitioner-Company is reproduced hereunder:....
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.... regard to the assessees or the persons who are responsible for collecting the service tax, the individual or the officer concerned can be identified and it is that person who would be a person responsible for collecting the service tax. In other words this provision, namely, Section 68(1- A) cannot be so interpreted as to make a person an assessee even though he may not be responsible for collecting the service tax. The service tax is levied by reason of the services which are offered. The imposition is on the person rendering the service. Of course, it may be an indirect tax; it may be possible that the same is passed on to the customer but as far as the levy and assessment are concerned it is the person rendering the service who alone can be regarded as an assessee and not the customer. This is the only way in which the provisions can be read harmoniously. 10. By amending the definition of "person responsible for collecting of service tax" in the impugned rules with regard to services provided by the clearing and forwarding agents and the goods transport operator a person responsible is said to be the client or the customer of the clearing and forwarding agents and the ....
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....hed a return under sub-section (1) or sub- section (2), discovers any omission or wrong statement therein, may furnish a return or a revised return, as the case may be, at any time before the assessment is made. 71. Assessment.-(1) For the purposes of making an assessment under this Chapter, the Central Excise Officer may serve on any person, who has furnished a return under section 70 or upon whom a notice has been served under sub-section (2) of Section 70 (whether a return has been furnished or not), a notice requiring him on a date therein to be specified , to produce or cause to be produced such accounts or documents or other evidence as the Central Excise Officer may require for the purposes of this Chapter and may, from time to time, serve further notices requiring the production of such further accounts or documents or other evidence as he may require. (2) The Central Excise Officer, after considering such accounts documents or other evidence, if any, as he has obtained under sub-section (1) and after taking into account any relevant material which he has gathered, shall, by an order in writing, assess the value of taxable service and the amount of service....
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....x can be levied on the members of the petitioners-association. It is further to be seen here that Section 64 gives powers to the Central Government to make rules for carrying out the provisions of the Chapter. The Chapter relates to taxing the services which are provided, the taxing on the value of the service and it is only the person who is providing the service can be regarded as an assessee. The rules therefore, cannot be so framed as not to carry out the purpose of the Chapter and cannot be in conflict with the provisions of Chapter V of the Act. In other words, as the Act makes the person who is providing the service liable, the provisions in the Rules cannot be made so as to make the recipient of the service liable. It is, thus, clear that the provisions of rule 2(1)(d)(iv) are clearly invalid. 22. So far as reliance placed on the notification dated December 31, 2004 for justifying levy of service tax from the members of the petitioners-association is concerned, that notification has been issued under sub-section (2) of Section 68 of the Act. Sub-section (2) of Section 68 reads as under: 68(2) Notwithstanding anything contained in subsection (1), i....
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.... tax in relation to the services rendered to the vessels and ships of the members of the petitioners-association outside India. 26. It appears that a similar provision in the rules was made applicable by the Government in relation to the clearing agents by making customers of the clearing agent liable for levy of the service tax. That question has been decided by the Supreme Court by its judgment in the case of Laghu Udyog Bharati (supra) and the Supreme Court has clearly laid down that the imposition of the service tax is on the persons rendering the services and by making a provision in the Rules, levy of tax cannot be shifted to the recipients of the services and the rule framed, which brought about this situation, has been declared by the Supreme Court to be invalid. The law laid down by the Supreme Court in its judgment in Laghu Udyog (supra) is squarely applicable to rule 2(1)(d)(iv), which is relied on in this case. It appears that it is first time when the Act was amended and Section 66A was inserted by the Finance Act, 2006 with effect from April 18, 2006, the respondents got legal authority to levy service tax on the recipients of the taxable service. Now, becaus....